Scope Ratings completed the monitoring review for Siena NPL 2018 S.r.l. on 21 April 2020. The review was conducted based on available payment information and investor and servicer reporting as of 1 February 2021 payment date. Credit ratings remain as follows:

Class A (ISIN IT0005331472), EUR 1,790,036,690 outstanding amount: BBB+_SF;

Class B (ISIN IT0005319139), EUR 869,991,773 outstanding amount: not rated;

Class J (ISIN IT0005319147), EUR 565,000,000 outstanding amount: not rated

Siena NPL 2018 S.r.l. is a static cash securitisation of of a EUR 24.1 billion portfolio (at closing) of Italian non-performing loans originated by Banca Monte dei Paschi di Siena S.p.A., MPS Capital Services Banca per le Imprese S.p.A. and MPS Leasing & Factoring S.p.A. The portfolio is serviced by four special servicers: Credito Fondiario S.p.A (also the master servicer), Italfondiario S.p.A., Juliet S.p.A. and Prelios Credit Servicing S.p.A. The class A was rated on 10 May 2018 and the legal maturity is in January 2033. Scope does not rate class B or class J.

Scope reviews its ratings on an ongoing basis, and at least once a year. Scope performs monitoring reviews to determine whether outstanding ratings remains proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodologies, latest developments, and the rated entity’s financial and operational aspects relative to similarly rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

As of 30 December 2020, aggregate gross collections since cut-off date amount to EUR 2,519.5, which represents, respectively, 63.2% of the initial business plan expectations and 90.5% of the updated business plan (with new projections starting from June 2019). Aggregate gross collections since transfer date amount to EUR 1,862.5m and are split between judicial proceeds (63%), discounted pay-off (‘DPO’) proceeds (32%), credit sale proceeds (4%) and other types of collections (1%).

Around 22% of gross collections since transfer date (EUR 400.5m) come from closed debtors, whose gross book value represents around 6% of transaction’s initial gross book value. The gross profitability on closed debtors (as reported in the servicer report) is slightly below the servicers’ expectation, standing at 95.3%.

Compared to Scope’s original expectations, cumulative gross collections are around 38% higher than Scope’s expected collections for the same period and represent around 33% of Scope’s expected lifetime collections under the class A analysis. The observed recovery rate on closed debtors is aligned with Scope’s recovery rate expectation under the class A analysis (29.9% observed recovery rate vs 29.3% expected recovery rate).

Interest on class B may be subordinated to payment of class A principal if cumulative gross collections fall below 50% of the initial business plan expectations. As per February 2021 payment date, no class B interest subordination occurred. Additionally, the servicing fee structure links the level of fees paid to the servicers with the portfolio’s performance: three special servicers failed to collect at least 90% of the amount targeted in their business plans. This resulted in a 10% haircut being applied on the servicing fees of those special servicers.

All transaction counterparties continue to support the rating.

CREDIT-POSITIVE (+)

Cumulative collections compared to Scope’s expectations. Observed collections are outperforming Scope’s original timing expectations for class A analysis, being 138% of Scope’s gross expectations.

Increased credit enhancement. Around 38.7% of the class A notional balance has amortised since closing. As a consequence, the credit enhancement relative to the portfolio’s outstanding gross book value for the class A notes has increased from 87.9% to 91.7%.

Portfolio servicing. Four independent special servicers limit the transaction’s sensitivity to servicer disruption. In the event of a servicer disruption, the master servicer will assist the issuer in finding a suitable replacement.

CREDIT-NEGATIVE (-)

Italian economy. The Italian economy faces a deep recession in the first half of 2021 fueled by the Covid-19 pandemic. Despite governmental support measures, increased collateral liquidity risk and weakened borrower liquidity positions could negatively affect the recovery prospects.

Liquidity protection. A 3.5% cash reserve provides liquidity to senior noteholders, covering senior fees and interest on class A notes for around one year. This liquidity coverage is lower than peer Italian NPL transactions.

The methodologies applicable for the reviewed rating (General Structured Finance Rating Methodology, published on 14 December 2020, Non-Performing Loan ABS Methodology, published on 9 September 2020, Methodology for Counterparty Risk in Structured Finance, published on 8 July 2020) are available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Leonardo Scavo, Senior Analyst

© 2021 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.